Why 2024 Could Be a Pivotal Year for Cryptocurrency

Jesper Johansen, founder and CEO of Northstake, believes that 2024 will be a turning point for institutions to enter the cryptocurrency space.

$1.4 trillion — this is the entire market capitalization of the cryptocurrency industry as of October 2023. While this is an impressive figure, it is almost three times less than the all-time high of over $2.9 trillion set in 2021. Last year, several crypto giants, including Chainalysis, Yuga Labs, Ledger, and Coinbase, announced layoffs. This, coupled with the bankruptcy of countless projects, shows one thing - we are in the throes of a crypto winter. But this bear market will not last forever, and perhaps not for long. In fact, considering the factors that are about to emerge in the coming weeks and months, 2024 may be a crucial year for the cryptocurrency industry, especially for institutional investors.

With the convergence of various factors, including the upcoming approval of Bitcoin and Ethereum exchange-traded funds (ETFs) in the United States and the implementation of the European Union's Markets in Crypto-Assets (MiCA) legislation, the adoption and mainstream acceptance of crypto assets will undergo a major shift. In addition, the Bitcoin halving event will occur in April 2024, which will further stimulate the market and may trigger a massive bull run. I believe that 2024 will be a turning point for institutions to enter the crypto field, which will bring unprecedented opportunities for large-scale application of industry technology.

Macroeconomic turmoil

The global macroeconomic situation plays a crucial role in the investment decisions of institutions. In recent months, we have witnessed ongoing fiscal and monetary turmoil due to international wars, pandemics, protectionist trade policies, and supply chain disruptions, coupled with painfully high interest rates. This has created a ripe environment for alternative investments - investors are scrambling to put their money into a safe store of value. And for the first time in a long time, Bitcoin and other digital assets have become strong contenders for such investments. In fact, a recent report highlighted that one of the biggest reasons for Bitcoin's growing popularity is its demand as a digital store of value.

In addition, we have witnessed several examples of institutions experimenting in the cryptocurrency space, such as Standard Chartered Bank enabling clients to participate in subscriptions. However, despite the growing interest in cryptocurrencies, institutional entry into the cryptocurrency market is still in its infancy, and the industry's potential as a mainstream global asset class has yet to be fully realized.

Unleashing your potential

In line with the thinking of institutions, what can really open the floodgates for the application of cryptocurrencies is the support from the world's trillion-dollar asset management companies. In the past year alone, we have witnessed institutions such as Blackrock (assets of $9.4 trillion), GrayScale (assets of $17 billion), WisdomTree (assets of $81 billion) and VanEck (assets of $76.4 billion) submit applications to the U.S. Securities and Exchange Commission for spot or futures cryptocurrency ETFs. In short, more than 10 Bitcoin spot applications have been submitted, and all applications are still awaiting approval from the U.S. Securities and Exchange Commission (SEC).

Due to the status, reputation and large asset portfolio of the above companies, their involvement in cryptocurrencies is undoubtedly significant. As one of the largest asset management companies in the world, their interest in Bitcoin and the entire cryptocurrency market is a sign of growing mainstream acceptance. Therefore, due to the influence and credibility of BlackRock and its peers, this increases the likelihood that the SEC will approve the above application, making it difficult for them to directly reject the proposal.

Furthermore, one of the main concerns expressed by regulators regarding crypto ETFs is the possibility of market manipulation. However, since major asset management companies are offering these products, the possibility of market manipulation is greatly reduced. With strong risk management practices, compliance standards, and market surveillance capabilities, they provide a more transparent and stable environment for crypto asset products.

The sheer size of institutional investment potential and the massive inflow of institutional capital could create significant buying pressure on cryptocurrencies — potentially driving prices higher and generating positive market sentiment.

Favorable legislation

In addition to the potential approval of ETFs, the implementation of the EU Crypto-Assets (MiCA) legislation is expected to have a significant impact on institutional interest in crypto assets. MiCA creates a comprehensive regulatory framework for digital assets within the EU, providing clarity and legal certainty, paving the way for institutions to confidently engage with cryptocurrencies and promoting increased trust and mainstream adoption. As the regulatory environment becomes more favorable, institutions will follow suit and be more inclined to allocate a portion of their portfolios to digital assets.

Bull Market Catalysts

Another event that could drive the cryptocurrency market is the Bitcoin halving, scheduled for April 2024. Historically, each halving event has been preceded by a substantial bull run characterized by significant price increases. The rate at which newly minted Bitcoins enter the market is reduced, creating an imbalance between supply and demand, leading to upward price pressure. If history repeats itself, the 2024 Bitcoin halving has the potential to ignite another explosive bull run, attracting institutional investors seeking to capitalize on potential gains.

Driving value and adoption

If all goes according to plan, as institutions enter the cryptocurrency market, their participation will continue to drive the value of projects, use cases, and overall adoption. Institutions bring credibility, expertise, and a wealth of capital, which can improve liquidity, stability, and the development of sophisticated financial products. As more institutions accept cryptocurrencies, the industry will further gain legitimacy and attract a wider range of users. Increased adoption could pave the way for the next billion users to join the cryptocurrency ecosystem, thereby democratizing it and driving the development of inclusive finance.

Looking at another industry that has nearly saturated both developed and developing countries: smartphones, it’s hard to imagine that it all started 30 years ago with IBM’s Simon Personal Communicator. The promising device could handle calls, emails, and faxes, but had a battery life of just one hour. From there, it took another 15 years for an industry giant called Apple to step in and help smartphones truly go mainstream. In 2007, Apple invented the iPhone, building on IBM’s original idea of ​​a multi-function device and making technology more accessible to millions of users than ever before. Institutions will do the same for the cryptocurrency industry. When that happens, it will hardly resemble the landscape we have today.

As more traditional financial (TradFi) companies begin to experiment with crypto applications, this will bring interesting use cases for users' interactions with Web3 applications. People will be able to use these applications in their daily lives, moving on and off-chain, and switching seamlessly between traditional and decentralized financial (DeFi) platforms.

As cryptocurrencies become more integrated with institutional investments, we can assume that 2024 could be the year that crypto payments develop and potentially be used to fund government and private activities — which would further drive the prices of these assets.

A crucial year

With all of these dominoes in play, 2024 looks promising for institutions looking to capitalize on the cryptocurrency market. Factors such as regulatory developments, the Bitcoin halving, and favorable macroeconomic conditions are converging to set the stage for increased adoption and mainstream acceptance of digital assets. As institutional interest grows, the industry will experience greater liquidity, stability, and the potential for explosive bull runs. The influx of institutional capital and participation will not only drive the value of the aforementioned assets, but will also pave the way for billions of users to reap and benefit from the advantages of blockchain technology. As 2024 approaches, it is clear that the cryptocurrency industry is on the cusp of a major transformation, driven by institutional entry and the democratization of global finance.